If you want to buy a house but have a credit score of less than 500, we have you covered as we’ll be pointing you toward the best home loans you can get with a credit score of 500 or less.
People often think that having a credit score of 500 doesn’t make them eligible for a home loan from Wells Fargo. This article will consider every option about Wells Fargo 500 Credit Score Home Loan have and how they can get a home loan from Wells Fargo and other financial services.
The good news is that home loans are still an option for a 500 credit score, even after hyperinflation. Even though the options have shrunk, some services still give home loans. So, let’s talk about that.
Contents
Do Home Loan For Credit Score 500 Exist?
The options are limited when it comes to a credit score as low as 500. Some private companies may issue home loans on a FICO score of 500, but these corporations aren’t insured by the government.
Most of the FHA and VA loans start at a Credit Score of 600 or more, but that’s not an option for you, right?
So, what options do you have with a credit score of 500?
A FICO credit score of 580 or less is considered “poor” or “bad,” so your options of getting a conventional loan are low. However, the FHA also has a loan scheme for bad credit scores.
The FHA Mortgage Program
Backed by the FHA and the U.S. Department of Housing and Urban Development, the FHA Mortgage program is designed specifically for those having a credit score of less than 500. The government ensures this loan scheme and helps people get home loans.
One thing you need to keep in mind is that these loans aren’t issued by the FHA itself; they are given by private lenders, except these lenders are backed and insured by the government.
One common misunderstanding is that FHA Wells Fargo 500 Credit Score Home Loan are only available to first-time buyers or applicants with low incomes. FHA loans are open to every house buyer who wishes to apply, despite the fact that their lenient requirements make it simpler to qualify if you have a poor credit score or revenue. The FHA program also allows current owners to remortgage.
Low Credit Score (around 500) Home Loans List
The FHA Loan
If you have a credit score of 580 at least, you will qualify for this loan – you’d have to pay 3.5% of the down payment.
If you have a credit score of 500, you’d still get this load, but your down payment would be 10%.
VA Loan
The VA loan is for those having a credit score ranging from 580-620. The downpayment for this loan can be as low as 0%.
USDA Loan
The USDA loan is given to those having a minimum credit score of 640. You can get this loan even with a 0% downpayment.
Conforming Loan
If you have a credit score of 620 min, you can get this loan with a down payment as low as 3%.
HomeReady Loan
The HomeReady loan is specifically for those willing to buy residential property. It also requires a min credit score of 620 – you can get this loan by making a downpayment of 3%.
Home Possible Loan
This home loan is for those with a good credit score, which is a minimum of 660. You can get this loan by making a down payment of 3%.
Non-QM Loan
The Non-QM loan is given to those with poor credit scores ranging from 500 to 580. The down payment for this one varies from case to case.
FHA Loan vs. Conventional Loan
An FHA loan is specifically for those having a low credit score. If you’re a first-time buyer, you can apply for this loan, given by a private lender but backed by the government.
On the other hand, conventional loans are given to experienced borrowers with a Good credit scores. If you have a credit score higher than 620, we recommend taking a conventional loan instead of an FHA loan because of its low down payment and cost of mortgage insurance.
Will Wells Fargo Give me Home Loan With Credit Score of 500?
This is the question we need to address here. We’ve been explaining the home loans and their requirements when it comes to the lowest credit score.
All the major banks in the US have a minimum credit score requirement regarding home loans. If you go to any major bank, the requirement would be at least a credit score of 640.
However, the FHA loan requirements are lenient as they’ve announced a policy change recently that allows low credit scores (500) to take home loans.
These are the terms and conditions according to the FHA’s new policy:
- If you’re a new borrower with a minimum credit score of 580, you qualify for an FHA loan with a 3.5% down payment.
- If you have a credit score of less than 580, you’d still qualify for the FHA loan, but the down payment would be at least 10%.
The FHA has changed the policy so that everyone can get a house in today’s economy. However, you need to keep in mind that you cannot get an FHA loan if your credit score is less than 500. You can apply for the FHA loan here.
Summary
As we’ve explained in the article, most major banks won’t give a loan with a credit score of less than 640 or even 580. The minimum requirement is no less than 580.
However, the FHA has changed its policies and backed private lenders that give loans on a credit score as low as 500. You need to find those private lenders or apply for the loan directly from the FHA website. (the link is given above)
If you still have questions about Wells Fargo 500 Credit Score Home Loan, you can contact the FHA by clicking this link.
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